Tuesday, May 3, 2005

Insider Trading by USPS Emplolyee

Advanced copies of Business Week have once again been the source of information for insider trading, this time by a former U.S. Postal Service employee who gained access to the magazine before its delivery to subscribers.  Davi Thomas agreed to settle SEC charges that he traded on material nonpublic information gleaned from the magazines, in violation of Postal Service regulations, that resulted in profits of approximately $154,000.  He also tipped a friend, Lionel Thotam, who realized approximately $77,000 in profits.  Thotam settled the SEC case in 2002. Thomas agreed to disgorge his profits (plus interest) and pay a one-time penalty equal to the profits.  According to the SEC Litigation Release (here):

From August 1996 through January 1999, Thomas misappropriated information from Business Week magazine before its public release by reading the Inside Wall Street column in the magazine as it passed through the Mount Vernon, New York postal sorting facility on its way to subscribers and news stands. He tipped Thotam to the information. Thotam paid Thomas $10,000 for Thomas's efforts, and updated Thomas on his profits from the illegal trades. Starting in June 1997 and continuing through January 1999, Thomas also traded in his own accounts in the stocks of the companies mentioned in the Inside Wall Street column. In almost all instances, Thotam and Thomas bought stock of companies favorably mentioned in the column on Thursday afternoons and sold the stock after the price increased the next day, after the column had been published.

Cliff Claven would be deeply saddened that a member of the USPS would breach his position of trust (a link to Cliff sound bites is available here). (ph)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2005/05/insider_trading.html

Civil Enforcement, Insider Trading, Securities | Permalink

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